Robert Dugger Spoke at the Insurance Insolvency & Reinsurance Roundtable on April 24 on a Session Called “Financial Issues Overview:  How Long Will the Ripple Effect Continue?”

Advance Version of Upcoming Press Release

BERWYN, PA. – April 30, 2009 – Global finance and government policy expert Robert H. Dugger moved an audience of 200 reinsurance executives and attorneys at a conference last week with a message that restoring the global economy rested on a theme he believed could serve as a global rallying point:  investing more in children. 

Click here to download the audio of the entire presentation:  robert-dugger-audio

Responding to a question from one of the attendees about where to invest now, Dugger said, “Investing in kids is how we get the economy back on its feet, and make a little money.”  
 
robert-duggerWe cannot predict breakthrough technologies in green systems, health care or information; however, he said a core deficiency of the U.S. economy in its education system in which we have “so tremendously underinvested.”  Describing the sector as comprising parents, teachers, pediatricians, toy and education product providers and many others, and as one that is “organizing itself,” Dugger said it makes up 10 to 12 percent of U.S. GDP.  He compared that to the financial sector, which included many executives in the audience from insurance companies and brokers, is 7.5 percent of GDP.
 
“Youth human capital at this point is one of the most underinvested sectors in the U.S. and globally,” Dugger declared. 
 
Dugger addressed the audience gathered in Scottsdale, Arizona for the “Sixteenth Annual Insurance Insolvency & Reinsurance Roundtable,” produced by HB Litigation Conferences LLC, formerly Mealey’s Conferences.  Tom Hagy, president of HB, said his company posted the full audio of Dugger’s presentation today.

Where We Really Are
 
“While inspiring and hopeful,” Hagy commented, “Dugger’s comments about rallying around the world’s children – prenatal to 18 years of age – followed a stark, sober and statistically rich portrait of our economy.  He showed how it measures up historically, how long it will likely take to resolve based on historical patterns, and what he sees as the major obstacles.”
 
But first, Hagy said, the most somber comment from Dugger was this:  “I don’t think there should be any doubt in anyone’s mind whether the world is in a depression or not.  It’s absolutely certain.” 
 
He said that declines in world industrial output, world trade, and world stock markets are all falling as fast as or faster than in the 1920s and 1930s.
 
Dugger said that when credit is no longer available for large traditional growth sectors, they start to contract.  And as these old-growth sectors contract, new ones crop up.  He noted that during the Great Depression IBM was a fast-growing new business.  And now, green energy, health care and technology are growing, but are not enough to offset the decline in the large contracting sectors. 
 
“Because we are talking about restructuring and rebalancing entire economies, recovery is not a matter of a few months or even a few years.  It will likely take seven to 10 years to reshape economies from one paradigm of economic growth to a new and sustainable growth paradigm.”  For example, he said, it took seven years from first recognition of the S&L crisis in the early 1980s till Congress voted the money to fund the Resolution Trust Corporation and solve the problem. 

Time to Move On

Debra Hall of Global Regulatory & Risk Consultants, a co-chair of the event, said “Rob’s enlightening view about the world economy and where we must head – while sobering – is an essential message that policymakers and taxpayers alike need to hear and take to heart. We need to stop asking where the bottom is.  Instead,” she said, “We must adopt a realistic view of the situation we are in and develop a policy strategy of how to grapple with it and come out on the other side.”

Dugger said a core challenge is moving beyond the difficult circumstances created by out-of-balance state and federal budgets.  “Budgets are expressions of Americans’ civil commitments to each other. Budgets say who gets what, who pays for what, and who owes what to whom. If budgets are unsustainable, commitments will be broken.  Promises will have to be cancelled.  Americans will be pitted against each other.  Taxes will go up.  The budget-advantaged and the budget-disadvantaged will fight.”
 
Dugger said the only way to get through this is to have a “new consensus” and also to end the current “borrow to spend” strategy of governments, corporations and individuals.  “We have to complete a civil transition of sorts.  A transition from the current a set of unsustainable civil commitments to a sustainable set of commitments.” 
 
An Imminent Fight for Budgetary ‘Oxygen’

A central feature, Dugger pointed to, is how money for “discretionary federal spending — money for Head Start, the federal court system, national parks, the Federal Aviation Administration and even the military — will be zeroed out in 15 years without massive tax increases and deficit increases, even assuming the elimination of the Bush Administration tax cuts and no economic slowdown. Dugger explained that federal revenues will be fully absorbed by interest payments on the national debt, Social Security and Medicare, and federal tax expenditures, that is tax subsidies and loopholes.” As resources diminish “interest groups will fight for the remaining oxygen in the budget,” Dugger warned.  “Political competition will delay asset-priced restoration and stability.”
 
He said the key to a true turnaround will be obtaining a new civil consensus that “is fair to most Americans and makes good economic sense.”  He expanded that by saying, “Because this is global, we need to balance the long-term interests of everyone in the world.”
 
“Mustn’t what’s good for the United States be good for everybody?” he asked.
 
Navigating Through

Borrowing from the navigational lexicon, Dugger said the “through-line” to reaching a new civil consensus is doing what’s best for the next generation.  Continuing the maritime theme, he said that when a ship hits the rocks, the first people in the lifeboats are the kids, then mothers, then fathers, “and the rest of us sit on the highest part of the boat singing ‘Nearer My God to Thee.’” 
 
Noting Lincoln’s through-line to “Preserve the Union”, Dugger said the nation has an opportunity to seize upon a unifying idea just as significant — “The life success of every child is the highest priority of the United States Government.’”
 
“It is our belief,” Dugger said, “that is an idea on which we can get most voters to agree. This is a principle that could serve as the kernel of a new civil consensus and the through-line for the transition.”

For more information on the economic benefits of investments in children, Dugger suggested visiting the website for the Partnership for America’s Economic Success, www.PartnershipforSuccess.org.

The Insurance Insolvency & Reinsurance Roundtable — attended by reinsurance executives, brokers, attorneys and others — was chaired by Debra Hall, along with co-chairs Peter Thomas, Executive Vice President and Managing Director of Willis Re and Neil Moglin, a partner with leading reinsurance firm Lovells LLP.